Homework Questions Cumulative 1

Price = 4Q

Find Revenue When Q = 3

36

Suppose

Price= 9Q and Cost = 109 + 6Q

Find the Profit When Q=12

1115

If a firm can sell all it produces for $16 per unit and the same firm has fixed costs of $119 and its variable costs increase by $ 2 for every unit produced, find the Break-Even Quantity.

8.5

Suppose $ 1,000 is placed in a savings account. If money is worth 6% compounded annually, what is the balance in the account after 22 years.

3603.54

Suppose that Price =27- 2.5Q and Fixed Costs =$ 114 and Variable Costs =4Q + 1.1Q2

Calculate the profit maximizing quantity.

3.19

In the United States, control of the quantity of money is given to the:

Federal Reserve System

To an economist, the term "inflation" refers to:

a continually rising price level

"Official" recessions in the United States are declared by:

the National Bureau of Economic Research

Nominal prices and nominal wages are _____

not adjusted for inflation

The CPI is a measure of the overall cost of

goods and services bought by a typical consumer

Which of the following agencies calculates the CPI?

the Bureau of Labor Statistics

The interest rate the Fed charges on loans it makes to banks is called

the discount rate

The Federal Funds rate is the interest rate

banks charge each other for short-term loans of reserves

The Federal Reserve does all except which of the following?

make loans to individuals

What is the maximum amount you would pay for an asset that generates an income of $250,000 at the end of each of five years, if the opportunity cost of using funds is 8 percent?

998,177.51

A firm's current profits are $800,000. These profits are expected to grow indefinitely at a constant annual rate of 5 percent. If the firm's opportunity cost of funds is 8 percent, determine the value of the firm:

a. The instant before it pays out current profits as dividends.

$28.80 million

A firm's current profits are $800,000. These profits are expected to grow indefinitely at a constant annual rate of 5 percent. If the firm's opportunity cost of funds is 8 percent, determine the value of the firm:

b. The instant after it pays out current profits as dividends.

$28.00 million

Jaynet spends $30,000 per year on painting supplies and storage space. She recently received two job offers from a famous marketing firm – one offer was for $85,000 per year, and the other was for $115,000. However, she turned both jobs down to continue a painting career. If Jaynet sells 20 paintings per year at a price of $8,000 each:

a. What are her accounting profits?

$130000

Jaynet spends $30,000 per year on painting supplies and storage space. She recently received two job offers from a famous marketing firm – one offer was for $85,000 per year, and the other was for $115,000. However, she turned both jobs down to continue a painting career. If Jaynet sells 20 paintings per year at a price of $8,000 each:

b. What are her economic profits?

$15000

Accounting profits are:

total revenue minus total cost.

Which of the following is an implicit cost of going to college?

Foregone wages

Which of the following are signals to the owners of scarce resources about the best uses of those resources?

Profits of businesses

Scarce resources are ultimately allocated toward the production of goods most wanted by society because:

firms attempt to maximize profits.

Economics:

exists because of scarcity.

Managerial economics:

is valuable to the coordinator of a shelter for the homeless.

To an economist, maximizing profit is:

maximizing the value of the firm

Generally when calculating profits as total revenue minus total costs, accounting profits are larger than economic profits because economists take into account:

both explicit and implicit costs.

According to the five forces framework, sustainable industry profits depend upon:

All of the statements associated with this question are correct.

The theory of the firm states:

that firms exists and make decision to maximize profits

You are in the market for a new refrigerator for your company’s lounge, and you have narrowed the search down to two models. The energy efficient model sells for $1,600 and will save you $40 in electricity costs at the end of each of the next five years. The standard model has features similar to the energy efficient model but provides no future saving in electricity costs. It is priced at only $1,350

Assuming your opportunity cost of funds is 6 percent, which refrigerator should you purchase?

The standard model

You are the human resources manager for a famous retailer, and you are trying to convince the president of the company to change the structure of employee compensation. Currently, the company’s retail sales staff is paid a flat hourly wage of $20 per hour for each eight-hour shift worked. You propose a new pay structure whereby each salesperson in a store would be compensated $10 per hour, plus 1 percent of that store’s daily profits. Assume that, when run efficiently, each store’s maximum daily profits are $25,000.

Which of the following arguments supports your proposed plan?

Employees' pay depends on store profits, so they will work hard to achieve higher profits

Jamie is considering leaving her current job, which pays $75,000 per year, to start a new company that develops applications for smartphones. Based on market research, she can sell about 50,000 units during the first year at a price of $4 per unit. With annual overhead costs and operating expenses amounting to $145,000, Jamie expects a profit margin of 20 percent. This margin is 5 percent larger than that of her largest competitor, Apps, Inc.

If Jamie decides to embark on her new venture, what are her accounting costs?

$145,000

Jamie is considering leaving her current job, which pays $75,000 per year, to start a new company that develops applications for smartphones. Based on market research, she can sell about 50,000 units during the first year at a price of $4 per unit. With annual overhead costs and operating expenses amounting to $145,000, Jamie expects a profit margin of 20 percent. This margin is 5 percent larger than that of her largest competitor, Apps, Inc.

If Jamie decides to embark on her new venture, what are her implicit costs?

$75,000

Jamie is considering leaving her current job, which pays $75,000 per year, to start a new company that develops applications for smartphones. Based on market research, she can sell about 50,000 units during the first year at a price of $4 per unit. With annual overhead costs and operating expenses amounting to $145,000, Jamie expects a profit margin of 20 percent. This margin is 5 percent larger than that of her largest competitor, Apps, Inc.

If Jamie decides to embark on her new venture, what are her opportunity costs?

$220,000

If good A is an inferior good, an increase in income leads to

a decrease in the demand for good A

The X-Corporation produces a good (called X) that is a normal good. Its competitor, Y-Corporation, makes a substitute good that it markets under the name "Y." Good Y is an inferior good.

How will the demand for good X change if consumer incomes decrease?

It will decrease

The X-Corporation produces a good (called X) that is a normal good. Its competitor, Y-Corporation, makes a substitute good that it markets under the name "Y." Good Y is an inferior good.

How will the demand for good Y change if consumer incomes increase?

It will decrease

The X-Corporation produces a good (called X) that is a normal good. Its competitor, Y-Corporation, makes a substitute good that it markets under the name "Y." Good Y is an inferior good.

How will the demand for good X change if the price of good Y increases?

It will increase

The X-Corporation produces a good (called X) that is a normal good. Its competitor, Y-Corporation, makes a substitute good that it markets under the name "Y." Good Y is an inferior good.

Is good Y a lower-quality product than good X?

Not necessarily - it could be higher or lower quality

Persuasive advertising influences demand by

altering the underlying tastes of consumers

The law of demand states that if the price of a good falls and all other things remain the same, the

quantity demanded of the good rises

Demand shifters do not include

the price of the goo

Advertising can influence demand by altering tastes of consumers. This type of advertising is known as

persuasive advertising

If firms expect prices to be higher in the future and the product is not perishable, then

the current supply curve shifts to the left

Good X is an inferior good if a decrease in income leads to

an increase in the demand for good X

If A and B are substitute goods, a decrease in the price of good A would

lead to a decrease in demand for B

If A and B are complementary goods, a decrease in the price of good A would

lead to an increase in demand for B

As we move down along a linear demand curve, the price elasticity of demand becomes more

inelastic

If the absolute value of the own price elasticity of steak is 0.4, a decrease in price will lead to

a reduction in total revenue

Lemonade, a good with many close substitutes, should have an own price elasticity that is

relatively elastic

Which of the following is not an important factor that affects the magnitude of the own price elasticity of a good?

supply of the good

Demand tends to be

more inelastic in the short term than in the long term

When the own price elasticity of good X is −3.5, total revenue can be increased by

decreasing the price

When marginal revenue is zero, total revenue

is maximized

Assume that the price elasticity of demand is −0.75 for a certain firm's product. If the firm lowers the price, the firm's managers can expect total revenue to

decrease

The South Beach Cafe recently reduced appetizer prices from $7 to $5 for afternoon “early bird” customers and enjoyed a resulting increase in sales from 100 to 150 orders per day.  Beverage sales also increased from 300 to 600 units per day.

Calculate the arc price elasticity of demand for appetizers

-1.2

For the first time in two years, Big G (the cereal division of General Mills) raised cereal prices by 4 percent. If, as a result of this price increase, the volume of all cereal sold by Big G changed by −5 percent, what can you infer about the own price elasticity of demand for Big G cereal?

elastic

If apples have an own price elasticity of −1.2 we know the demand is

elastic

Demand is more inelastic in the short term because consumers

have no time to find available substitutes

If the cross-price elasticity between ketchup and hamburgers is −1.2, a 4 percent increase in the price of ketchup will lead to a 4.8 percent

drop in quantity demanded of hamburgers

If the price of pork chops falls from $8 to $6 and this leads to an increase in demand for apple sauce from 100 to 140 jars, what is the (arc) cross-price elasticity of apple sauce and pork chops?

-1.17

If the income elasticity for lobster is 0.4, a 40 percent increase in income will lead to a

16 percent increase in the demand for lobster

Suppose that your friend owns a coffee shop and seeks your advice on changing the price of coffee to increase total revenue. If you know that demand for coffee is unit elastic what advice will you give your friend?

To keep the price of coffee unchanged